[Hidden-tech] Employee question

[Don Lesser]

A lot of questions. You should check with your accountant who is the final
arbiter. Briefly:

1. You need to do withholding and payroll. QuickBooks does a good job but
the payroll module is $250/yr. Expensive for two employees (you pay
yourself, right?) How do you pay yourself now? If it is owner's draw or on a
Schedule C, you might find putting yourself on a salary and paying W2 style
taxes to your advantage.

2. Disability, health, etc. are optional. If you offer them to yourself, you
need to offer them to any 20+ hour employee. You can set limits (1 yr
service before it kicks in, pay for the person, they pay the family
difference, you split the costs, etc.) 

3. SEP-IRA I believe is the same as other benefits. You have to pay the same
percentage to the emp's IRA account as you do yours. You can set a vesting
period. There are other rules. Check Vanguard or Fidelity .com for info on
the rules.

4. You can get a lot on-line, but your accountant is the one who you should
listen to. Are you a  Corp, LLC, sole proprietorship? Acct can tell you the
benefits and costs to each.

5. I believe you will have to get workman's comp insurance. Most consultants
are required to but few seem to. With an employee, your exposure is greater
and the last thing you want is the Feds or State taking an interest in your
company.

6. You'll have to pay withholding taxes and 1/2 FICA and Social Security for
the employee, probably on a monthly basis. Once you get the schedule down,
you're OK, but keep in mind that monthly taxes add up quickly. The taxes,
penalties and 18% interest can add up faster than you can say vig. 

7. Hiring consultants (1099) employees is convenient, but remember that the
IRS and the State have complicated rules about what is and is not an
employee and that if they decide you have misclassified an employee as a
consultant, they can assess triple penalties. Consultants always want to be
consultants, but as an employer, you see things in a different light. Here
is where your accountant will probably err on the side of employee and your
employee will err on the side of consultant. It is a b*tch, but make sure
you understand what you are getting into.

I consider myself fairly liberal, but I begin to get crazy when I deal with
gov't agencies and rules. And, there is a whole other set of advice about
hiring, training, managing, firing employees. Suffice to say, don't hire
your friends and relatives, remember the difference between an employee and
a friend and that a friendly relationship is not the same as a friendship,
remember that the employee does not see your business the same way you do.
Employees are not entrepreneurial--that's why they are employees and not
business owners. Similar to the difference between a parent and a
friend--not that you need to be paternal to your employees but you need to
maintain some distance. Manage by talking and address issues directly. We
all want to avoid conflict, but I try to think of myself as a scientist in
these situations: this is the observed data, this is the suggested solution.
You want to maintain empathy and discuss options, but when you finally have
to say, "This is wrong. Don't do this." or "There are several approaches,
this is the one I want to take," it helps to be dispassionate and not get
into personalities.

I don't mean to sound negative about all of this. It is just that you need
to approach the situation carefully and deliberately and be informed.

On the other hand, when you and your staff complete something that is bigger
and better than you could do alone, it is a great feeling. It is also a good
feeling to know that you are helping to feed other families. A
responsibility, but satisfying as well. And when you hire someone who can do
things that you cannot or who simply frees you up to do what you do best, it
is also liberating.  

Long-winded answer to a large question. I have been in business for nearly
30 years with employees for most of them. I have made every mistake at least
twice. 

Don Lesser
Pioneer Training, Inc.
139B Damon Road, Ste 2
Northampton, MA 01060
(413) 387-1040
(413) 586-0545 (fax)
dlesser at ptraining.com
www.ptraining.com


-----Original Message-----
From: hidden-discuss-bounces at lists.hidden-tech.net
[mailto:hidden-discuss-bounces at lists.hidden-tech.net] On Behalf Of Jeff
Rutherford
Sent: Friday, June 04, 2010 1:33 PM
To: Hidden-Tech Tech
Subject: [Hidden-tech] Employee question

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I'm considering hiring my first employee, but I have several questions and I
wonder where I can find this info.

What do I need to do re: withholding and other payroll taxes? Do I need
disability insurance even though this person will be working remotely - from
their own apartment/house?

I have a SEP-IRA. By law, do I need to offer this employee a 401-K or
something similar? Also, what's the regulations re: providing health
insurance, etc?

Anyone know where I can turn to get answers to these various questions or
should I just ask my accountant all these questions?

Jeff


Jeff Rutherford
413-475-0087
jeff at jeffrutherford.com


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